Strava: Resignations and reading between the lines
After rejoining the company in 2019, Strava‘s CEO has just resigned his role. This undoubtedly signals that Strava is far from immune to the bike industry’s current financial woes and needs a change of direction.
For a great recap of some of the factors leading up to the resignation, check out dcrainmaker’s in-depth analysis here (links to dcrainmaker.com) or Strava’s announcement here (links to strava.com).
Opinion
Strava is just not worth the money but most cyclists want, and almost need, to use it.
In my opinion, Strava is not worth the money for most cyclists, despite their desire and almost necessity to use it. The annual subscription fee has nearly doubled to around $/£/€100, but if your sole purpose is to use Strava as a data hub or to track progress on your favourite segments, then it is probably not worth more than $5-$20 per year. On the other hand, if you regularly utilize Strava’s performance features, route creation, heatmaps, and training plans, it adds considerable value or at least it would if Strava had a more usable and intuitive interface.
Strava has gone to great lengths to buddy up with cycling’s leading company…Garmin. Yet Strava has failed to realise that Garmin Connect pretty much does everything that Strava does, for ‘free’.
Its only truly unique features of any importance are activity-based social interactions, its segments and the leaderboards around them – Garmin does that too. Still, we all have friends who use other platforms and Stava is the place where all our friends can play together nicely.
Most of us are doing Strava a favour by using its app and giving it our data.
Reading between the lines
I’ve heard some pretty dire stories from companies in the cycling industry in the USA & UK and you have, no doubt read publically about the numerous layoffs at Wahoo, Zwift and elsewhere.
Most likely, Strava’s regular install base is still growing, but the number of active users decreasing in line with global trends. More significantly, I believe that the subscription fee’s doubling has led to a significant number of cancellations and set off alarm bells for those monitoring Strava’s primary revenue stream. Worse still, manay people will renew their subscription this year without realising the magnitude of the price increase until they’ve already paid…those people won’t be seen in the cancellations until the subsequent year.
It almost seems that only Garmin is hiring but maybe they have some tactical business opportunities as well as the need to replace normal staff churn. We will shortly see how bad things are in the industry when Garmin’s last quarter results are released. Take the degree of decline in its gross margin as bell-weather to what is truly going on elsewhere.
The Change of Direction
Strava has various strategies to expand its business, including targeting new markets, adding features, offering premium services, partnering with other companies, and expanding into new areas. However, these options have uncertain returns, and Strava needs to generate tens of millions of dollars more annually. The most straightforward option for growth is through hosting ads, which could bring in millions but that’s probably not enough. Strava could also consider reducing staff and development to a bare maintenance level and becoming a cash cow, but this conflicts with the desires of its VCs for growth and a high return on investment.
Take Out
The cycling industry is currently undergoing seismic structural changes, and Strava is likely feeling the effects as well. For many athletes, the cost of Strava’s subscription does not provide enough value to justify the expense.
While Strava could explore alternative revenue streams, the only untapped option is generic advertising, which has suffered a significant decline in revenue in the wider market this year. I hate to say it, but if I were in Strava’s shoes, I would re-introduce an additional tier of subscription that offers an ad-free experience. Of course, this would require Strava to also become a complete ad-serving platform, which is not a change that can happen overnight, plus it would be a change that Strava is adamant it will not make (even in 2023).
An advertising-based revenue model, along with a basic subscription level, would be a fair solution that allows us to support Strava through either ads or membership fees.
If you enjoy a product or website, like this one or others you frequent then you need to support it or, as we’ve seen with Strava, you run the risk of losing it entirely. Would you then rather have Garmin fill the space?
You pay for what you get.
It’s all down to you.
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Support them is already happening to a too high degree as you judged it looking at the fee……
I don’t think I’ll find what I do with the prog worth more than say € 10. Per year!
I even do more with Veloviewer, which charges an amount like that….
They all just need to downsize to profitability. Even twice the features wont get them 5% more subscribers and any price hike will be eaten up by cancellations. Be glad about what you have, namely being *the* de-facto social network for cycling and being the perhaps sole social network that found a way to get serious revenue from subscription-not-ads. Subscription-not-ads is an inattainable holy grail dream for most others. Find a way to be happy with that and that means cutting costs. If costs are mostly computing resources (AWS bills or actual servers) find ways to do the same with less, or cut/streamline particularly expensive features (even more, because that already happened to some extent), if costs are mostly not servers, well, you are an american company, there are options.
sadly Capitalism requires growth.
At this point, funded too big for any takeover exit, the only way to make the investments still a success, or to at least do some damage control is going public. And for going public their biggest hindrance right now isn’t lack of growth, they desperately need to demonstrate ability to operate at a profit. Any profit. More units won’t help them as long as those units remain lossy.
yep. exactly so
they have few choices. advertising is the only one i can see and even that might only make a trivial difference to the bottom line. calculations i did on that quite some time ago suggested otherwise though. i guess it really depends on how many active users they really have and how active they are in using the app and how many pages in the app are accessed.
Why “sadly”? Capitalism drives civilisation, socialism equals stagnation. Also, why bring politics into the article anyway!
You or Ray have said elsewhere, the free features are too good to make most pay for the subscription.
Most just want to:
View people’s summary activity
Give a kudos
Comment once in a while for a good race result
Look at weekly stats
Bite the bullet – put ads on the web and mobile site
maybe it was Ray. I don’t quite think that.
Strava’s USP is segments.
I want decent access to segment-related features either via ads or via a small subscription. All the rest, to me, is gumpf. Good gumpf but not $100pa gumpf.
You say “Most just want to:” I suspect that what you want and the above is what I want and 20 other people might beg to differ 😉 albeit slightly and with similar themes
My USP of Strava is half-half between segments and “social network”. I’d rather loose segments – and switch to native Garmin ones – than lose my friends and colleagues across the world and giving them kudos. But I’d prefer to keep paying and have both 🙂
Should the cost of the Strava app be considered next to the annual cost of the sport equipment? Generalising massively but for most serious cyclers and even runners the annual equipment and maintenance cost is multiple times the new app subscription.
Bingo! All I have to do is look at my cycling bibs/shorts, $150-300 per pair, shirts, three bikes, head unit, power meter, lights, shoes, bike trainer, fans, desk, Zwift, Trainerroad, travel, bike rack, and on and on and yeah Strava’s cost in that context is nothing. In exchange for which I enjoy the social aspect of seeing my friends rides and adventures. And while Garmin Connect does offer many of the same route building features the Garmin Heatmap doesn’t come close to the data and information available in Strava’s. Which is a very important difference as someone who likes to take the path less traveled often off road, but not too less traveled as there’s great piece of mind knowing others have used it.
So, at some point, Garmin buys Strava for a pittance like Fitbit did to pebble. They consolidate strava and Garmin connect and, unlike Fitbit, continue to offer the full premium for free to Garmin device owners and charge everyone else.
As they expand the health functionality on their watches, including continuous heart/afib monitoring, etc, they’ll pretty much will make Fitbit irrelevant…
not so sure about that.
there’s been too much raised for strava for VCs for it to go in a fire sale. that’s part of their problem.
interesting idea about garmin charging non garmin users for it if they bought it. that would make sense for garmin (if they bought it)
Yes I think this is about right. The data that Strava uses via .fit files is only generated by Garmin device’s without Garmin and other vendors then Strava is no more. If Garmin pulls the API as it could then Strava loses a large percentage of its user base overnight.
It would make sense if Garmin used the data it collects in a more Strava like way for the user and allowed some custom use for a small charge. At the same time Garmin would have the data from other vendors devices so in theory would be able to make their own devices better and also me relevent through the use of the data it would hold. It would also give Garmin multiple new revenue streams as Strava sells details to many companies.
Garmin couldn’t reasonably buy Strava, even if the price was merely a single dollar, because competitors in the device field could end automatic uploads with little more than a bat of an eyelid and then Garmin would have roughly the same cost at considerably less revenue. Strava is a complement to their products and all device makers should know that in the long run they are better off with an attractive “neutral” platform making sports tech as a whole more attractive to their buyers. If the sports device market shrinks to pre-Strava days even winning 100% of that tiny market would be a loss compared to what they have now. In theory it might even make sense for the device makers to start a joint neutral “save Strava” foundation if it ever came to an existential fire sale (yeah, that cooperation would be about as likely as me getting surprise-crowned king of the UK, and I’ve never even laid a foot on the island).
strava has already received total funding of $150m over several rounds. I seem to remember the final round of $110m in 2020 https://www.crunchbase.com/funding_round/strava-series-f–426ed0aa valued the company at 1bn.
sure something is better than nothing but I can’t see the owners failing to get the initial investments back. by the same token I can’t see Polar et al raising that amount of money ($150m) even with the help of Garmin (who wouldn’t help)
When it comes to revenue models, adding advertising is a poor solution and would indicate the product folks at Strava don’t know their customers or the company is hemorrhaging money. Either case is bad.
Operationally, most tech companies that expanded headcount during the pandemic to meet demand are ‘right-sizing’ their staff.
As a Strava customer I don’t see the value in their solution at a higher price. That being said if there were a tier that offered a feature set at the current (before increase) price I think more people would keep it.
Yes there are great deal of features in Garmin that mimic Strava but almost all of them, Strava does better. If Garmin were to acquire them, hopefully it would not only lead to a better user interface but also a better user experience.
right sizing…yep, fair comment
a revenue portfolio is a good model. that’s what they’ll have as, to a degree, they also have sponsorship and sell their data to other people (eg city planners, presumably anonymised). Both those two would require additional headcount to sell the service
I don’t see what other options they have. I’d imagine charging Garmin to link to them might not be the best idea in the ideas bag.